KKR is taking full advantage of the dislocation in the real estate financing market from traditional lenders.
The investment firm’s pipeline of private commercial real estate financings recently hit $42 billion, Bloomberg reported. The company disclosed the record in a note released by the company’s real estate credit group.
Deals are popping up rapidly for KKR as a chasm continues to grow between private lenders and the risk tolerance of banks and other traditional lenders in the industry. Additionally, commercial real estate values are resetting across sectors.
Interestingly, tariff policy has also worked in KKR’s favor, dating back to “Liberation Day,” which “brought an unexpected new set of opportunities,” according to the real estate credit group. The volatility that wreaked havoc in the tariff rollout’s aftermath temporarily sidelined many traditional lenders wanting clarity, allowing alternative lenders such as KKR to emerge.
KKR embraces property loans as a hedge against inflation, basking in collateral-based cash flow and floating-rate terms. The typical KKR loan comes in at 60 to 70 percent of the real estate’s value to give the firm an equity cushion.
The firm has no plans to back away from the market. In February, it announced a fundraise of $850 million for Opportunistic Real Estate Credit Fund II, set to back first mortgages secured by properties in both the United States and Europe.
KKR is also predicting construction activity to remain limited in the coming years, which could create favorable conditions in the supply-demand ratio, especially if KKR can get in on the low end of real estate valuations now.
“We will be putting in billions of dollars to work over the next few years,” said Matt Salem, the company’s head of real estate credit, though the company will keep an eye on inflation and interest rates in case a strategy shift is in order.
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